First Person: The Real Reason You're Broke

Yahoo Contributor Network

For most of my working life, I lived paycheck to paycheck, always struggling to survive the last few days before I was paid again. I never seemed to save much and I was always behind on at least one bill. For years, I blamed my income. I wasn't living below the poverty line, but I wasn't exactly rolling in money come payday either. I kept telling myself that if I just made more money everything would be different. Then I found a better job making more money and ended up living paycheck to paycheck again.

Turns out, my income level wasn't the problem. It was how I managed my money. Here is what I was doing wrong.

Not Budgeting

I wasn't a complete money novice, I did write down a very rough budget on a piece of paper one evening. And after that, I never looked at it again. I estimated the cost of most of my monthly expenses, never tracked them to find out if I was right, and never adjusted my budget. I might as well not have had one in the first place.

For a budget to work, you need to manage it. That includes making sure your monthly expenses are accurate and making adjustments as needed. Otherwise, you may be spending far more than you think you do each month.

Not Tracking My Expenses

I wasn't big on tracking my expenditures or balancing my checkbook. Instead I simply checked my bank account online a few times a week. If I still had a positive balance, I kept spending. In fact, I kept right on spending until all of the money was gone, never really knowing what I had spent it on but assuming it was something I needed.

Having a budget will only work if you monitor your spending and make sure you're not overspending on any one category. Once you've got that down, tracking your spending is a good way to see where you are wasting money. For example, I spent close to $300 a month dining out. Once I saw that in black and white, it was easy to stop and save most of that money.

Not Paying Myself

For years I lived by the theory that I would just put whatever was left in my checking account into savings on the next payday. The problem was, there was hardly anything left to contribute to my safety net by payday. After three years of saving, I only had $250 in my savings account.

The best advice I was ever given was to pay myself first. Now I have my bank accounts set up to automatically withdraw 10 percent of my paycheck into my savings account. Since I never see the money, I never miss it. If I do have anything left on the next payday, I move that into my savings as well. I've been able to save enough to make the down payment on a house this way.

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